What effect will the new tax law have on the income tax payment of foreigners

The Individual Income Tax Law of the People's Republic of China, promulgated on August 31, 2018, is implemented in three phases: the first stage, which is the preparation phase of the transitional policy until October 1, 2018; The second stage, from 1 October 2018 to 31 December 2018, is the preparatory stage for the implementation of the transitional policy and the implementation of the individual income tax system combining comprehensive and classified forms (hereinafter referred to as the "new tax system" ); The third stage, effective from 1 January 2019, is the full implementation phase of the new tax system. This revision of the Individual Income Tax Law will have a far-reaching impact on China's tax reform and on how foreign individuals calculate and declare personal income tax. The main contents are as follows:

Impact one:

Change in deduction criteria: salary payments to foreign individuals effective 1 October 2018, The deduction from the original 4800 yuan per month to 5000 yuan per month, consistent with the individual of Chinese nationality, there is no difference.

Impact two:

In a tax year, foreign nationals who have lived in China for a cumulative period of 183 days will be judged as "resident taxpayers", global taxes! In other words, income derived by foreign individuals from China and abroad is subject to individual income tax in accordance with the provisions of this Law, provided that they have resided in China for 183 days or more. The following is a short list of days in China:

Number of days of residence: for individuals who have no domicile in China (referring to individuals who do not habitually reside in China because of their domicile, family or economic interests) The calculation of the number of days he/she has resided in China in order to determine his/her tax liability in China in accordance with the provisions of tax laws and agreements or arrangements shall be made on the basis of the number of days he/she actually stays in China. The actual number of days spent in China by the above-mentioned individuals on the day of their entry, departure, return or multiple return within and outside China shall be counted as one day. (State Administration of Taxation) [2004] (Number 97)

Number of working days: individuals working (including part-time), employed in enterprises and institutions within the territory of China while they are actually working in China, This shall include days of public holidays, individual holidays and days of training held inside and outside China during the period of employment in China; The period during which he holds a post in an overseas business establishment and performs that function or provides services at an overseas business premises, including the public holidays during that period, shall be the period of working outside China.

Where an individual who is not employed or employed in an enterprise or institution within the territory of China is assigned to work in China, the period of his actual employment within the territory of China shall include the days of sabbatical leave enjoyed within the territory of China during the period of his employment in China. (Letter of State Administration of Taxation) [1995] (No. 125)

The actual number of working days within the territory of the People's Republic of China shall be half a day for a person who holds a post concurrently in China or an overseas institution or who has no domicile within the territory of the People's Republic of China, or who has only served in an overseas institution, on the day when he enters, departs, commutes to or from the territory of the People's Republic of China. (State Administration of Taxation) [2004] (Number 97)

Impact three:

Change in manner of filing. If a foreign individual is judged to be an individual resident, the individual resident shall calculate the individual income tax on an annual basis; If there is a withholding agent, the withholding agent shall withhold taxes on a monthly or periodic basis; If a settlement is required, the settlement shall be made within the period from March 1 to June 30 of the year following the receipt of the income. The measures for withholding advance payments shall be formulated by the competent tax authority under the State Council.

If a foreign individual is judged to be a non-resident, the non-resident shall receive wages and salaries, For income from remuneration for labor services, income from remuneration for contributions and royalties, if there is a withholding agent, the withholding agent shall withhold taxes on a monthly basis or on a successive basis, and shall not settle the settlement and payment.

Impact four:

Changes in Expenses Deductions: For foreign individuals who have lived in China for 183 days in a tax year, their income from wages may be deducted by 60,000 yuan per year, in addition to the amount of 60,000 yuan per year, Special deductions and additional deductions may also be made, including: basic old-age insurance, basic medical insurance, unemployment insurance and other social insurance premiums and housing provident funds paid by foreign individuals according to the scope and standards set by the State; The specific additional deductions, including the expenses for children's education, continuing education, medical treatment for serious illness, interest on housing loans or rent for housing, and support for the elderly, shall be determined by the State Council and reported to the Standing Committee of the National People's Congress for the record. The specific scope, standards and implementation procedures shall be determined by the State Council.

For foreign individuals who have resided in China for less than 183 days, only 5,000 yuan shall be allowed to be deducted monthly, and special deductions and surcharge deductions shall not be allowed for the income derived from their wages.